Stock Market Outlook for July 18, 2019
Silver miners are outperforming the price of silver, conducive for a move higher in each.
*** Stocks highlighted are for information purposes only and should not be considered as advice to purchase or to sell mentioned securities. As always, the use of technical and fundamental analysis is encouraged in order to fine tune entry and exit points to average seasonal trends.
Stocks Entering Period of Seasonal Strength Today:
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SkyWest, Inc. (NASD:SKYW) Seasonal Chart
Scotts Co. Cl A (NYSE:SMG) Seasonal Chart
Regis Corp. (NYSE:RGS) Seasonal Chart
Pfizer, Inc. (NYSE:PFE) Seasonal Chart
The Markets
Stocks drifted lower on Wednesday as transportation stocks plunged amidst a negative reaction to earnings from railroad operator CSX. The S&P 500 Index shed two-thirds of one percent, giving up the 3000 level that had been widely praised in recent days. A momentum sell signal with respect to MACD has now been triggered, an indication that buying demand has faded. As indicated yesterday, levels down to the 50-day moving average are fair game in order to keep the intermediate rising trend intact. Major moving averages, including the 20, 50 and 200 day, are pointed higher, keeping the positive trajectory over multiple timeframes intact.
Precious metals are on fire. Bucking the losses on the session were the price of precious metal commodities and the stocks of their respective producers. The Gold ETF (GLD) added 1.65% on the day, while Silver realized a gain of 2.75%. We highlighted the move in silver the other day, showing the long-term bottoming pattern that could see a swift move higher towards $18/ounce. Important in order to be aggressive in the commodities is the performance of the respective producers as the stocks will tend to lead the commodities themselves. Investors will often look to the stocks to leverage the move in the commodity that these companies produce. The Silver Miners ETF (SIL) relative to the Silver Bullion ETF (SLV) bottomed at the end of May, moving back above a declining trendline that had been intact over the past few years. The trend of outperformance of the stocks versus the commodity appears to have begun. This is conducive for a move higher in both. Seasonally, precious metal prices tend to rise through the third quarter as volatility in the equity market tends to entice investors to other asset classes. In the Seasonal Advantage Portfolio that we manage in partnership with Castlemoore, we have exposure to precious metals, including Silver.
On the economic front, a rare June decline in shelter and fuel prices in Canada was enough to drag on aggregate CPI for the month of June. The headline print of Canada’s report on the consumer price index indicates that prices fell by 0.2% last month, which was inline with the consensus analyst estimate. The result is a negative divergence compared to the 0.1% increase that is average for this time of year. CPI is higher by 2.2% through the first six months of the year, firmly outpacing the 1.8% average increase through this same timeframe. We sent out further analysis to subscribers, including the potential investment implications. Signup now and we’ll send it to you.
South of the border, housing starts in the US showed the best first half of the year performance in 7 years, emphasizing the strength in the housing market. The headline print of June’s housing start report in the US indicated that activity declined by 0.9% to a seasonally adjusted annual rate of 1.253 million. This was a slight miss versus estimates of a rate of 1.260 million. Stripping out the seasonal adjustments, starts actually declined by 0.8%, which is a negative divergence compared to the 2.3% increase that is average for this time of year. The year-to-date change is up a whopping 54.6%, which is 12.0% above the seasonal average trend through the first six months of 2019. This is the best pace over this timeframe since 2012. Subscribers received further insight, including how to play the home building industry through the back half of the year. Subscribe now.
Also released on Wednesday was the weekly petroleum inventory report. We deferred providing analysis, as we typically do, given the distortions that were present in the data as a result of the recent hurricane disruption in the Gulf of Mexico. The charts have been updated and are available for review via the following link: https://charts.equityclock.com/u-s-eia-weekly-petroleum-status-report We’ll have further analysis when activity returns to normal next week.
Sentiment on Wednesday, as gauged by the put-call ratio, ended neutral at 0.99.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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